First, let us define the term marketing budget’ clearly. Your marketing budget refers to all costs for marketing activities, including but not limited to promotions and advertising, public relations, SEO costs, social media marketing, sponsorships, influencer marketing,and anything else that falls to this category.

If you are outsourcing all of your marketing strategy in an all-in-one package, the cost will be your marketing budget. Yet, if you are hiring an in-house team, generally the cost will be tied into your human resources cost.

The revenue here can be actual and projected, but there can be many other factors that can alter this number.

For example, newer businesses will need a higher marketing budget to introduce their brand. Also, some industries and/or niches will require a higher marketing budget: generally, the more common/easier to produce your product is, the more you should spend on marketing.

So, you should spend at least 2-5% of your gross revenue on marketing. Newer businesses might need more, and can spend up to 20% of their total gross revenue. On the other hand, the recommended maximum for established businesses is 12%.

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Most businesses spend about 10-12% of their annual revenue on marketing.

Of that budget, most companies typically spend 35-40% of that on digital marketing.

Marketing should be approached scientifically, so your digital marketing spend is based on metrics like keyword volume and audience size.

It is recommended that remarketing be used in parallel with paid search because those users have expressed interest in your brand already.

Depending on what you read, different research groups state that businesses should be spending approximately 10-12% of their annual revenue on marketing. These percentages aren’t stone-clad; the percent varies per industry and even by the product or service that’s being marketed. For a starting point though, 10% is a great place to begin. Of that 10%, most companies are budgeting anywhere from 35%-40% on digital marketing.

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If you spend too little, your message won’t make it to your target audience. If you spend too much, you won’t have the budget you need for other important aspects of your marketing plan.

So how much do you spend, and what do you spend it on? As the new year unfolds, you need to figure out:

How much money to spend on digital marketing

How much of that goes to each tactic social, email, SEM, etc.

What tools you need, and how much they cost

Other expenses you need to plan for.

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The Bottom Line:

No matter the size of your business, it’s important to research how much you should spend on digital marketing. Agencies vary in their digital marketing prices, but plenty claim that they offer extremely cheap rates and that is what your company needs to look out for when looking at agencies.

In almost all cases, you get what you pay for in terms of digital marketing services. So cheap services often don’t drive the results you want.

That is why it’s critical to set a reasonable digital marketing budget. If you try to make your price range as low as possible, you’ll get what you pay for, unfortunately.

What is a reasonable budget, though?

While several factors influence digital marketing budgets, like the size of your company and the scope of your project, the average digital marketing budget ranges from $30,000 to $145,000 per year for SMBs. Keep in mind that digital marketing is an ongoing strategy , so your budget may change as you grow.

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